FCC’s fascination with cable regulation could lead to a la carte cable

Though it's not yet official, the FCC is testing the waters with a plan to …

FCC Chairman Kevin Martin took to the op-ed page of the New York Times today to defend his plan to relax media regulations, but the real news in recent days has been Martin's push to put the cable industry on a short, government-approved leash. Pundits inclined to be broad-minded see this as evidence that Martin approaches issues thoughtfully and is willing to do more than simply put a "deregulate everything" ideology into practice every time an issue comes before the FCC. Critics contend that it's more evidence that Martin is beholden to the telcos and is administering a bit of payback to the cable companies.

It's a curious way to practice regulation, but the FCC has a habit of talking to the press about policies it plans to adopt before such policies are even official. In other cases, though, Commission staffers can't seem to keep talking to the very companies they regulate.

In any event, Martin wants the FCC to get involved in more closely regulating the cable industry based on provisions of a 1984 deregulation law, and he's been telling the press all about it. An executive at the NCTA, which represents the industry, tells Ars that the group is operating in the dark, and in fact is reduced to reading press reports and (presumably) tea leaves.

Martin wants to act under a provision of US law that states: "at such time as cable systems with 36 or more activated channels are available to 70 percent of households within the United States and are subscribed to by 70 percent of the households to which such systems are available, the Commission may promulgate any additional rules necessary to provide diversity of information sources."

FCC Chairman Kevin Martin

This is known as the 70/70 rule. Once the two thresholds have been crossed, the FCC appears to have broad authority to intervene in the cable industry. But have both targets been exceeded?

When it comes to the first threshold, there's no real debate. The NCTA's own numbers show that cable lines passed more than 100 million homes as of March 2007. But the group does not agree that 70 percent of those homes passed have signed up for the service.

NCTA president Kyle McSlarrow said in a recent statement sent to Ars, "Every independent analysis of the marketplace shows that cable serves less than 70 percent of the nation's households and even the FCC staff concluded last year that cable was well short of this threshold." He also claimed that FCC attempts to regulate cable were "unnecessary government intrusion."

McSlarrow also filed a letter with the FCC today arguing that the "70-70 test hasn't been met."

AT&T, which has lobbied the FCC to take action under the rule in the past, must be thrilled with the newest developments. We expect that execs in charge of the company's IPTV offering, U-Verse, will spend the rest of the day bathing in huge troughs of champagne. But publicly, at least, the company isn't beating the war drums.

An AT&T spokesperson tells Ars, "With respect to the source of information used to determine whether the second 70 percent threshold has been reached, the Commission should require the cable operators themselves to provide such information. Both the Commission and the cable industry agree that publicly available sources of information have limitations with respect to their use in calculating the second 70 percent threshold." Very sporting stuff.

The move could be important because increased FCC regulation of cable has the potential to bring about several important changes:

The FCC could prevent mergers or even limit growth among cable operators

The Commission could impose à la carte packages on an industry not eager to offer them

Cable could find itself forced into certain "common carrier" requirements that might require companies to lease lines to other operators or carry more shows

The move also comes soon after another major FCC decision that blocked the exclusive contracts cable operators often sign with apartment buildings and condo associations (called Multiple Dwelling Units, or MDUs, in FCC parlance). The NCTA also objected to this ruling, which appeared to specifically target the cable industry. The ruling also will invalidate many current contracts, a provision that will no doubt be challenged soon in court.